Q&A: Timothy Scrantom, Litigation Finance Entrepreneur
Timothy Scrantom is a litigation financing pioneer. He cofounded Juridica Investments Ltd. in 2007, and then in 2011 he teamed up with former plaintiffs lawyer John "Sean" Coffey Jr. and former Simpson Thacher & Bartlett partner Michael Chepiga to start another funding firm, BlackRobe Capital Partners. But BlackRobe was not a success, and it disbanded last May. Before BlackRobe failed, it made an ill-fated investment backing plaintiffs in a dispute over oil development rights in Kurdistan. That case served as grist for an American Lawyer feature in September.
Now Scrantom has formed a new venture with Frederick Dulles called Scrantom Dulles International. The firm describes itself as a "law, consultancy and investment advisory firm focusing on commercial litigation finance and risk management." Dulles was a Juridica director with Scrantom, worked in-house at Phillip Morris International, and was a partner at McDermott, Will & Emery.
We spoke to Scrantom on Thursday about his latest move. Our conversation was edited for clarity and length.
Litigation Daily: Why did you decide to form this venture?
Timothy Scrantom: There are dedicated pools of capital out there, like Juridica and Burford, but there is no one rendering services, like consulting services or legal services, to deal with people who want to invest [in litigation] and don't know how to do it. Also, claim holders might want advice on how to monetize their claims.
But our real interest in this, what we like to think of as our sweet spot, is dealing with lawyers looking at the pressures of alternative fee arrangements. They know their clients want lawyers more and more to share risks. We see a role advising lawyers and law firms on how to better rationalize and operate portfolios of claims.
LD: How active are law firms in this area?
TS: It's varied. There are some firms that state as part of their mantra they will take risk in some or all of their cases: Quinn Emanuel; Bartlit Beck; and McKool Smith. Other firms do a lot of it, like Kirkland & Ellis. Firms are all looking at it. But we think they're not approaching this with the discipline and tools used in litigation finance.
I think a big reason that more investors and law firms haven't come into this space is the stigma. Everybody for so long bashed the plaintiffs bar that the idea of joining the plaintiffs bar is hard. But I think we're overcoming that stigma and people are realizing that this is a business tool.
LD: How will you be paid?
TS: We don't like hourly fees. We will look for project-based fees, fixed fees. We could operate for an interest in the investment.
LD: Do you already have clients?
TS: We do. We've got one out of Asia. We have a couple law firms in the U.S. and in England.
Now that the London firms can [work for contingency fees], you will start to see the big British firms like Allen & Overy and Clifford Chance start to compete with this tool in their belt. The British lawyers are pretty enterprising.
LD: What types of cases attract the most outside financing?
TS: Patent cases. Upward of 50 percent of the patent infringement claims market is seeking contingency fees. There's also a lot of activity in international disputes, especially cases where plaintiffs are bringing claims against a foreign state.
LD: So what happened to BlackRobe? Why did it disband so quickly?
TS: We did not have enough internal capital. [The founders] put in significant amounts of our own capital. After about 16 months, it was not clear we would be able to have a sufficient pool of capital raised in time.
LD: Did you lose a lot of money in BlackRobe?
TS: It's not written off as a total loss, but it likely will result in a loss. … We have a couple of investments out there that are still awaiting a result.
LD: What can you say about the Excalibur investment that was a big loss for BlackRobe and other investors?
TS: I can tell you a lot of smart people were very, very surprised at that outcome. There were five Magic Circle firms that were involved in advising the investors or the claims holder on the validity of Excalibur's claim, and they all thought it was a good claim.